SEC charges firm with deceiving investors in stock fraud scheme

On Behalf of | May 27, 2022 | Financial News

The Securities and Exchange Commission has charged a Florida-based firm with fraud for securities violations that deceived thousands of investors, the commission announced in a news release.

The SEC filed a complaint in federal district court in Manhattan against StraightPath Venture Partners LLC, StraightPath Management LLC, founders Brian K. Martinsen, Michael A. Castillero, Francine A. Lanaia, and fund manager Eric D. Lachow. The defendants were accused of “selling pre-initial public offering shares they did not own, pocketing undisclosed fees, and commingling investor funds, resulting in Ponzi scheme-like payments.”

The SEC obtained emergency relief that included freezing the assets of Martinsen, Castillero, Lanaia, StraightPath Venture Partners, and StraightPath Management, saying it was taking the action in order to stop the ongoing fraud and preserve assets for investors.

The complaint alleged that the defendants raised at least $410 million from more than 2,200 investors from November 2017 through February 2022.  The investors were told that each investment would be separate and they would not be charged upfront fees. Instead, the SEC said the defendants commingled the funds, paid themselves over $75 million and paid their sales agents nearly $48 million from illegal, undisclosed markups on the pre-IPO shares.

“We allege that the defendants deceived investors about the pre-IPO shares they held, how much they were charging in fees, and who was controlling the business—all while paying themselves more than $75 million,” said Lara S. Mehraban, Acting Director of the New York Regional Office.

According to the complaint, investors were not told that two of the three founders, Castillero and Lanaia, were running the funds despite the fact that they had been barred from the brokerage industry.

The defendants were charged with violating antifraud and other provisions of the federal securities laws.  The SEC is seeking permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties, while also seeking a receiver for the firm.  The defendants were also ordered not to destroy any additional relevant documents. Castillero and Martinsen had allegedly deleted copies of emails sought by SEC staff members.

Lewitas Hyman routinely represents investors harmed when financial professionals and their firms engaged in misconduct that caused their clients investment losses. Our team includes lawyers who have worked for large financial institutions and regulatory bodies such as the SEC. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Lewitas Hyman at  (312) 291-4600 or through our online contact form for a no-cost evaluation of your matter.

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